Here’s what will hold back housing for the next two years

Home-building rates will remain low over the next couple of years as the population expands slowly and it remains tough to get a mortgage, among other market challenges, according to a Monday research report by analysts at RBC Capital Markets.

RBC’s Robert Wetenhall forecast that housing starts throughout the U.S. in 2014 will hit 1 million, compared with 925,000 in 2013. Those figures are far below an average of 1.46 million starts per year over the half-century through 2013.

And the next two years only look a bit better, with starts hitting 1.05 million in 2015 and 1.1 million in 2016, RBC expects.

“Slower demographic growth, a soft labor market, tight lending standards, and a sharp increase in the cost of home ownership will make incremental volume growth more difficult to achieve if [economic growth] continues tracking in the range of 2% to 2.5%,” RBC analysts wrote.

The housing market has disappointed many economists this year, with a weak first quarter dragging down forecasts for 2014 sales. And while it’s been five years since the recession ended, construction rates are still relatively low. Many builders are opting to build pricey homes in high-demand markets, instead of ratcheting up the number of units that they are producing.

Just last week the government reported a sizable drop in new home construction – a blow to economists who had expected the firming labor market to underpin higher building rates. However, those looking for a silver lining were able to find one: The government also reported that permits for single-family homes – a sign of future demand – rose in most of the country.

Builders themselves think that home sales are likely to strengthen, with demand supported by a healthier labor market and workers who feel more secure about their career outlook and personal finances.